3 for 3 | 41 comments (41 topical, editorial, 0 hidden)

Do take some vacation and enjoy the summer. :)

:: ::

Just one question.

The remaining EUR 182.5m of the long-term debt is being provided by [commercial banks].

If there are six banks and one of them is the EIB, then the five remaining commercial banks lent on average 36.5 million euros. This seems like a pretty small sum to me (who knows nothing of this particular market). Obviously banks don't want to put all their eggs in the same basket when it comes to lending, diversification is very important, but given the size of the banks involved, it still seems like small sums per bank. Is this level usual, or could a project like this be financed by fewer banks each lending larger sums, in more normal times?

:: ::

The same applies to the equity investment, especially if the debt-to-equity ratio is something like 90/10 or 80/20 which is about the range you've mentioned earlier when talking about wind investment. Then the total equity is something like 50-100 million euros, or maybe 8-17 million euros per equity investors. If the investors are privare individuals, it's certainly large chunks of cash, but if they are power companies?

:: ::

Obviously I'm not asking questions about this specific project as that might be sensitive in all kinds of ways, but I'm rather inquiring about the wind power market in general.

By the way...

Well done! :D

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Jul 24th, 2009 at 06:54:34 PM EST

PF stuff (4.00 / 7)

It's actually 4 banks, so it's amount at risk in the 35-50 range, which is actually quite standard for project finance.

In normal times, for bigger deals, what would happen is that a small number of banks would underwrite the transaction (ie take a bigger chunk of risk) and then syndicate it to other banks to reduce their exposure. But the syndications markets have been dead or 2 years now, so you have to either do smaller deals, or find all the banks in the club from the start (which means involving more banks in the negotiations, which is not simple). In our case, the EIB's participation allowed to avoid the problem.

Debt:equity is more like 70:30. I can't really comment on the investors here, but offshore is now a big utility play, and not only do they usually have 50-100% of projects, but they don't even use project debt, funding it all on their balance sheets (which means multi-hundred million euro investments on their side).

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Jul 25th, 2009 at 02:48:29 AM EST
[ Parent ]

Ah, quite information ... uhmmm, what did you say? (none / 0)

but offshore is now a big utility play, and not only do they usually have 50-100% of projects, but they don't even use project debt, funding it all on their balance sheets (which means multi-hundred million euro investments on their side).

Who is "they" ... that is, in the "big utility play", who's playing? The utilities themselves? Or the amorphous "thems that does utility plays"?

And "funding it all on their balance sheets" ... is that all equity funding?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Jul 25th, 2009 at 10:42:08 AM EST
[ Parent ]

they = big utilities (4.00 / 3)

offshore wind farms are billion euro investments (or a large fraction thereof). So it's mostly the big investors of the sector that do them. And they pay for the full investment on their balance sheets.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Jul 25th, 2009 at 11:59:08 AM EST
[ Parent ]

Re: they = big utilities (4.00 / 3)

How important is economies of scale in offshore (and onshore) wind?

Are the savings big when you build 100 turbines at a site compared to 10 or 1? Or are the savings marginal, and the reason that the big utilities build big wind farms just because they are used to working with big projects and that's where their competencies lay (like when big oil leaves small fields to be developed by independens)?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat Jul 25th, 2009 at 01:54:20 PM EST
[ Parent ]

economies of scale (4.00 / 4)

matter more offshore because some of the fixed costs are rather high. In particular, the cable and the offshore transformer station can cost several tens of millions of euros, which requires more than a few MW of capacity to bear if you want any kind of profitability. You also need specialized vessels and cranes for installation and then maintenance, so scale does matter, at least up to a certain point (which mostly depends on location and can vary depending on the regulatory framework - who pays for the cable, whether your permit gives you rights to a given area, to a number of turbines or to a given capacity)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Jul 25th, 2009 at 02:29:15 PM EST
[ Parent ]

Ah, you answered the question at the ... (none / 0)

... Big Orange ... the "big investors" are the utilities themselves.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 26th, 2009 at 06:16:36 PM EST
[ Parent ]

Re: Ah, quite information ... uhmmm, what did you (4.00 / 3)

E.On, RWE (Innogy), Vattenfall, Scottish Southern Energy (Airtricity), Centrica, EnBW, EWE, who did i forget? StatOil, Norsk Hydro, the early adapter DONG.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Sat Jul 25th, 2009 at 12:14:35 PM EST
[ Parent ]

3 for 3 | 41 comments (41 topical, 0 editorial, 0 hidden)

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